How Much Do You Really Know About Home Loans?
Homeownership is still a cornerstone of the American Dream, but for many prospective buyers, it feels more like a moving target. According to KB Home’s latest National Homeownership Month survey, 89% of Americans feel anxious about affording a home. Yet 83% still consider owning a home an essential life milestone.
While buyers can’t control high interest rates or tight housing inventory, they can control how informed they are. Unfortunately, that’s where many are falling short.
The survey revealed large gaps in basic knowledge around mortgages, financing terms, and loan qualifications—issues that can keep buyers on the sidelines longer than necessary.
“The dream of owning a home is still very real, even if many people are unsure how to get there,” said Rob McGibney, President and COO of KB Home.
Below, we break down some of the most common misunderstandings around home loans—and explain how having the right information can help you navigate the market with confidence.
1. Mortgage Rates Aren’t the Highest in History
Nearly 7 in 10 Americans believe that current mortgage rates are the highest they’ve ever been. While it’s true that rates have risen significantly since the pandemic-era lows, they’re still below the historical average of 7.7%.
For context, mortgage rates peaked at 18.6% in 1981—more than double today’s rates. This misconception can lead to unnecessary hesitation, with buyers waiting for a return to 3% interest rates that experts agree is unlikely in the near future.
The takeaway: Today’s rates, while higher than recent years, are still manageable, and locking in a fixed rate now could protect you from future increases.
2. You Don’t Need a 20% Down Payment
One of the most persistent myths in homebuying is that you need to put down 20% to qualify for a mortgage. In reality, many loan programs—including FHA loans—require as little as 3.5% down. Some conventional loans and first-time buyer programs even allow for 0–3% down, especially for veterans or buyers in targeted income brackets.
The risk of this myth: Believing you need 20% down may delay your homeownership goals by years, especially in high-cost areas like Los Angeles.
3. Low Credit Doesn’t Automatically Mean No Loan
Another major misconception is that poor credit means you can’t get a mortgage. While having good credit can improve your terms, buyers with credit scores in the 500s may still qualify—particularly for government-backed loans.
Only 25% of survey respondents were aware of this, meaning many could be sitting out of the market unnecessarily.
Pro tip: Talk to a lender before counting yourself out. Pre-qualification doesn’t cost anything and can help you understand what options are available to you.
4. APR and PMI Matter More Than You Think
Half of buyers in the survey didn’t understand what APR (Annual Percentage Rate) is, and nearly as many were unsure what PMI (Private Mortgage Insurance) means. These aren’t just financial jargon—they directly affect what you pay over the life of your loan.
- APR includes your interest rate plus fees, giving you a better comparison point across lenders.
- PMI is typically required if your down payment is less than 20% and adds to your monthly mortgage cost.
Why it matters: Understanding these terms can save you thousands of dollars and help you avoid unwelcome surprises in your monthly payment.
5. You Need the Right Advice—Not Just TikTok Tips
For many Gen Z and millennial buyers, the hardest part is simply knowing where to begin. About a quarter of younger respondents said they felt overwhelmed by the process, and many didn’t know who to trust.
In an era of viral videos and financial influencers, it’s easy to fall victim to one-size-fits-all advice. But real estate is local, and your strategy should be, too.
Instead of relying on social media, seek out real estate professionals, housing counselors, or reputable lenders who know your market and can walk you through your personal situation.
Conclusion: Knowledge Is Power in Today’s Market
If you’re thinking about buying a home, getting informed is one of the most powerful steps you can take. You don’t need to be an expert, but understanding the basics of loan options, rates, and requirements can help you make smarter choices and avoid costly mistakes.
In today’s uncertain market, confidence starts with clarity.
Ready to Start Your Homebuying Journey?
At Boutique Realty, empowered buyers make the best homeowners. Whether you’re just starting your search, exploring loan options, or looking for a trusted partner to guide you through the process, we’re here to help.
🔍 Let’s demystify the mortgage process—together.
📞 Contact us today or schedule a consultation with one of our experienced agents.
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